Construction kickstarts 2024 with output uplift

The construction industry has started 2024 strongly, with an increase in housing work seeing the sector bounce back into growth.

Construction output expanded by 1.1 per cent in January compared with December, with a total output value of £15.42bn compared with £15.25bn, according to the Office for National Statistics (ONS).

In December, the sector shrank by 0.5 per cent, as the UK economy also entered a technical recession. But there was a an uptick in housing activity in January, with new housing work leading the charge with a 2.56 per cent increase.

Repair and maintenance in the housing sector was also up, by 0.47 per cent, which helped to offset slight decreases in new work in the industrial and commercial sectors.

Aecom head of programme, project and cost management Scott Motley said the increase in productivity “raises hopes that the construction sector is turning a corner”.

“Inflationary issues have receded since the start of the year, and most long-term cost issues within contracts have either been renegotiated or worked through,” he added.

“That said, the cost of borrowing remains heightened at a time when we’re seeing tender activity becoming more competitive in some subsectors.”

RSM UK partner and national head of construction Kelly Boorman agreed that output was “starting to move in the right direction”, partly due to January being a relatively dry month.

“Encouragingly, housing transactions and house prices are starting to rise, which coupled with December 2023’s uptick in mortgages, will help to restimulate the housing market, which had reached its lowest point last year,” she said.

“Contractors continue to be selective about the work they commit to in order to protect their margins, but as interest rates have now reached their peak and start to fall, this will bolster the housing market.”

However, quarterly output fell by 0.9 per cent, driven mainly by a 9.3 per cent collapse in new work within the infrastructure sector. The amount of new housing work also fell by 3.8 per cent, despite a strong showing in the public sector, and repair and maintenance work ticked up by 4 per cent.

Clive Docwra, managing director of construction consultancy McBains, warned it “remains to be seen” whether January will represent a blip or will actually signal wider recovery across the sector.

The drop in quarterly output, he said, confirmed that “conditions remain unsettled for many industry sectors”.

Looking ahead, Motley said that most contractors remain “reasonably confident in their financial health”. But he warned some firms will struggle as 2024 is being billed as a year for “modest growth”.

“Indeed, many will be watching carefully as housebuilder earnings season – a bellwether for others – gets underway this week.”

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